GameStop, AMC Trading Restricted by Robinhood, Interactive Brokers

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GameStop, AMC Trading Restricted by Robinhood, Interactive Brokers

Following an ongoing trading frenzy spearheaded by regular investors and day traders, Robinhood and Interactive Brokers have become the latest platforms to ban trading in many massively shorted companies.

Robinhood said in a blog post that it is limiting trades for some equities, including GameStop, AMC Entertainment, Blackberry, and Bed Bath & Beyond, among others, to position closure. According to Robinhood, margin requirements on some equities have also been hiked.

“We constantly watch the markets and make modifications as needed,” Robinhood said. “With increasing market volatility, it is more critical than ever that we assist consumers in staying informed.”

Meanwhile, Interactive Brokers said on Twitter that it had liquidated option trading for GameStop, AMC, Blackberry, Express, and Koss Corp. owing to “extreme volatility in the markets.” In addition, Interactive Brokers increased margin requirements for some equities.

The action comes only one day after TD Ameritrade became the first online broker to impose trading limits on these heavily shorted equities, after a multi-day rise led by retail investors and day traders.

GameStop stock has increased 1,300% this year, while AMC stock has up 308%.

Numerous broker problems occurred on Wednesday, and several equities, including GameStop and AMC, faced trading halts.

The World is Watching

The record level of trading was caused by a new class of individual investors and day traders who have flooded the market since the outbreak began. Many of them participated in a purchasing frenzy last year, chasing down troubled firms they thought deserved a second chance. Reddit’s WallStreetBets has become a popular site for these new day traders to debate the equities.

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“Individual investors are being denied the chance to trade on @RobinhoodApp,” the Reddit forum’s admins tweeted. “Hedge funds and institutional investors may continue to trade normally in the meantime.” What do you describe a market that eliminates ordinary investors’ capacity to purchase in order to preserve institutional investors’ short positions?”

On Thursday, the legal firm ChapmanAlbin filed a class action lawsuit against Robinhood on behalf of individuals who lost money after investing in Gamestop or AMC. According to the complaint, Robinhood hired social media influencers to urge people to sign up for and buy shares of Gamestop and AMC, only to ban trading in the securities the next day.

Short sellers who bet against these equities have already lost billions of dollars. As GameStop shares surged on retail investor excitement, short sellers who faced rising losses and steep borrowing costs were obliged to liquidate their positions and purchase, resulting in a short squeeze.

The Biden administration, including Treasury Secretary Janet Yellen, as well as the SEC and FINRA, are “watching the situation.” Day-trading manipulation of the stock market is often frowned upon by market authorities, and laws are likely to follow.

“We do not anticipate this scenario will improve unless exchanges and authorities suspend or place certain symbols in liquidation,” Interactive Brokers stated on Twitter. “We will continue to monitor market circumstances and, if necessary, add or delete symbols.”

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